New draft law on civic organizations

The current law “On citizens’ associations”, from 16 June 1992, has received well-deserved criticism from representatives of civic society. It is largely through their lobbying that the Ministry of Justice has submitted to parliament a new draft law “On civic associations”.

The draft law was tabled on 14 November and with a new coalition having got the Verkhovna Rada working again, there seems a chance that it may be passed. Roman Holovenko from the Institute for Mass Information stresses that there are failings, but that it contains a number of positive changes.

Norms on founding civic organizations

The new law would allow legal entities, excepting state bodies or bodies of local self-government created through subordinate legislation, to found civic organizations. At present only individuals are legally able to do so.

Legalization of civic organizations can be carried out via 1) registration or 2) sending notification that the organization has been founded. Under current legislation registration envisages the obtaining of legal entity status. The draft law clearly stipulates that civic organizations legalized through notification do not become legal entities.

One somewhat retrograde step is seen in the norm making it possible to refuse to legalize an organization when it sends its notification of creation. This makes all civic organizations dependant at the stage of creation on the Ministry of Justice.

In any case, however, founders of civic organizations in practice prefer the first means of legalization, i.e. registration, partly because by becoming a legal entity they can carry out wider-scale activities, being able to attract funding from outside and not depend on the enthusiasm and funding of their members.

While the proposed time frame for considering documents for legalizing a civic organization of ten days cannot be considered very long, it is an increase on the present three days.

Five days is now proposed for review of notification that an organization has been founded, however no time limit was given before at all since at present the legalizing body in theory must only record the information, not assess it for its compliance with the Law.

The draft law also broadens the possibilities for state bodies to suspend civic organizations. With organizations legalized via notification of creation, it will be possible to suspend them by publishing the relevant announcement in the printed media if there is no activity identified by the organization over three years. Grounds for compulsory dissolution of a civic organization through court order include the formulation “carrying out activity prohibited by law”. This wording would seem broader than the norms of current legislation which given a comprehensive list of prohibited types of activity.

A painful issue for civic organizations is the financing of its activities. The draft law envisages that civic organizations are non-profit making. At the same time, unlike the present law which allows for economic activity via the creation of separate account-keeping legal entities, the draft law allows the organizations themselves to carry out economic activity without a profit-making aim. However with this change in legislative wording, it is perhaps not warranted to expect that sale at cost price or lower of products by non-profit making organizations linked with their basis activities will be treated by the tax bodies as non-taxable income. Despite the existence already in the Law “On taxation of the profit of enterprises” of norms which waive tax on the income of non-profit making organizations in the form of “funds or property received by such non-profit making organizations from carrying out their main activity”, the State Tax Administration only waives tax on passive income not from, but for running its main activities (donations, grants, etc).

The draft law needs revision and the Institute for Mass Information plans to take all efforts possible to improve legal regulation of civic organizations in Ukraine, and are prepared to work with all organizations and specialists interested in ensuring appropriate legislative changes.

Slightly adapted from the analysis by Roman Holovenko at www.imi.org.ua